Pricing philosophy
costs isle government
When Aloha Petroleum delivered a bulk supply of regular unleaded gasoline to a Hawaii Kai Post Office last month, it charged the federal agency about 51 cents a gallon, excluding taxes.
When Aloha made a delivery earlier in the month to a state facility downtown, it charged nearly 72 cents a gallon for the same kind of gas.
Why the big difference?
The prices charged to the two governments are based on different benchmarks specified by their respective Aloha contracts. The Post Office, like other federal agencies, uses a mainland index; the state uses a local one.
Relying on a local index has meant the state has less volatility in its gas pricing from month to month, but it ends up paying a premium for that.
Since the state switched to the local index last July, its average per-gallon price on Oahu has been around 76 cents, based on figures for the downtown site.
For that same period, the federal government paid an average of roughly 69 cents a gallon to BHP Hawaii to get gasoline for the island's military bases.
Based on a monthly estimated use of 50,000 gallons, the difference cost the state more than $31,000 since July -- not including the higher price it pays for premium-grade gas.
The state isn't the only local government paying a premium.
The City and County of Honolulu likewise pegs its contract price with Diamond Head Petroleum to the local market.
Last month, it paid 74.5 cents for regular unleaded -- 23 cents more than the Post Office and nearly 28 cents more than the military.
Suppliers to the Post Office and military must use selected California "rack" prices posted by Oil Price Information Service, an independent price-tracking publication, to adjust their Hawaii amounts.
A rack price is what a distributor or wholesaler pays per gallon to pick up gas at a refinery site.
Typically, the Hawaii federal prices are based on the benchmark plus a set amount, usually a few cents per gallon to cover supplier margins.
Most local, state and federal agencies on the mainland use OPIS for their bulk-buying gasoline contracts, according to fuel purchasers there.
"That's like the industry gold standard," said David Morehead, spokesman for the Petroleum Marketers Association of America.
When told the city and state governments here use different benchmarks and consequently have seen their gasoline prices change little in recent months, the mainland government buyers expressed amazement.
"Wow. Somebody's gotta be catching some heat for that," said Kevin Harbor, petroleum administrator for Los Angeles, which has seen its regular unleaded price drop from 97 cents a gallon in January 1997 to 55 cents earlier this year.
Harold Sonomura, a Department of Accounting and General Services administrator who helped develop specifications for the state's bulk gas purchases, said the supplier used to use an OPIS index pegged to the West Coast.
But the prices fluctuated so much from month to month, even when local pump prices weren't changing, that budgeting for gasoline purchases became difficult, Sonomura said.
Also, the state wanted an index tied to the local market, he said.
So when the new contract was awarded last summer, the state required prices to be pegged to the monthly average of the Honolulu dealer wholesale price reported by Lundberg Survey, another price-tracking service.
"We would like to get our gas cheaper if we could, but we wanted a more stable index," Sonomura said.
The city, on the other hand, doesn't use a specific index but has vague guidelines pegged to price adjustments its supplier offers to all consumers.
If the vendor is a wholesaler, price adjustments are tied to changes made by the wholesaler's supplier.
Asked why the city uses such a system, Charles Katsuyoshi, city purchasing administrator, said, "This is what we've been doing in the past. That might not be the right thing to do."
When told about price differences between city and federal purchases, Katsuyoshi said he intends to re-evaluate the city's purchasing process.
"We're off base," he said.
Lucky you live on base -- at least for fueling the family car. Fuel prices drop on military bases
Pump prices at Oahu's Army and Air Force gas stations have dropped 17 cents a gallon between January 1997 and March 1998.
At stations outside the bases, prices have dropped roughly half that amount.
The March military price: $1.469 per gallon of regular unleaded. The outside price: $1.54 to $1.62. The bases survey nearby civilian stations and set prices at the lowest end, according to a spokesman for their buyer.
Energy official says
Associated Press
gas prices will average
$1.10 a gallonWASHINGTON -- Gasoline prices will remain low and will generate "the sharpest increase in highway travel" in a decade this summer, the Energy Department predicted today.
The department said the cost of unleaded regular gasoline likely will average about $1.10 a gallon over the normally high-demand summer months, or about a dime lower than last summer.
But motorists can expect the nation's roads and highways to be crowded with an expected 3.8 percent surge in highway travel that will cause gasoline demand to jump.
Even so, Energy Secretary Federico Pena said he anticipates no supply shortages. Motorists will be traveling 1.4 trillion miles this June through August, he said.
Despite recent attempts by world oil producers to curtail production, petroleum prices remain depressed, leading to some of the cheapest gasoline in years.
Currently, the average price for unleaded regular gasoline is $1.03 a gallon nationwide, according to the Energy Information Administration. The agency predicted that this summer gas likely will peak at around $1.12 a gallon on average, although it could go as high as $1.18 in some places. Even when prices are low, there usually is a seasonal increase during summer heavy-driving months.
Even so, said Pena at a news conference, when taking inflation into account this summer's gasoline will be "the lowest in recorded history" and -- along with a robust economy -- is expected to produce a surge in highway travel.
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